United States

More stories

  • 125 Shares99 Views

    in Economy

    Workers Are Still in High Demand, Department of Labor Reports

    by

    Job openings last month remained near record levels, and the number of workers voluntarily leaving their positions increased, the Labor Department said on Tuesday.The data, released as part of the agency’s monthly report on job openings, layoffs and quitting, serve as indicators of how much demand there is for workers in the U.S. economy and the extent to which employers are still struggling with labor shortages months after the economy began recovering from the pandemic’s worst damage.There were about 11.3 million job openings in February, essentially the same as the month before and down a little from a record in December, though the number of hires overall edged up by 263,000 last month, to about 6.7 million.After falling during the peak of Covid-19 lockdowns in 2020, the rates at which so-called prime-age workers — those aged 25 to 54 — are working or seeking work has rallied back to prepandemic levels. Yet with the economy growing faster than in decades, demand for labor has outpaced the availability of workers — at least at the wages and benefits employers are offering.There are still roughly three million or so people who have not returned to the work force, according to the government data.“Looking at how poorly our labor force has grown so far this year, if companies want to win the war for talent they need to engage the people who may not be actively seeking work right now, or be the first option people see when they do return,” Ron Hetrick, a senior economist at Emsi Burning Glass, a data and research company, wrote in a note.That echoes the sentiment of many unions and labor activists, who have been saying that even though wage growth has picked up, people aren’t feeling valued enough by employers. It’s led to fresh questions about how bosses might get to know the “love language” of their hires and find sometimes unconventional ways to show them that they care. There are also more straightforward requests: Several progressive economists have noted that employers could, for instance, take some jobs generally expected to be low-wage — such as fast food service and cashiers — and entice workers by offering higher pay and better benefits.Large public companies and small businesses alike often say that they have already substantially raised pay from before the pandemic and that with inflation raging at highs unseen since the early 1980s, raw material and other costs have made business more difficult. An expensive surge in commodity markets suggests that price increases for food and energy could worsen, especially if firms raise prices further.Still, despite widespread frustration with inflation and shortages of some products and materials, some surveys suggest businesses are becoming more optimistic about the future. The MetLife and U.S. Chamber of Commerce Small Business Index recently reached a pandemic-era high, with about three in five of the small business owners surveyed saying their business is in good health. More

  • 125 Shares99 Views

    in Economy

    Why the U.S. Can’t Quickly Wean Europe From Russian Gas

    by

    The Biden administration’s plan to send more natural gas to Europe will be hampered by the lack of export and import terminals.HOUSTON — President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will largely be symbolic, at least in the short run, because the United States doesn’t have enough capacity to export more gas and Europe doesn’t have the capacity to import significantly more.In recent months, American exporters, with President Biden’s encouragement, have already maximized the output of terminals that turn natural gas into a liquid easily shipped on large tankers. And they have diverted shipments originally bound for Asia to Europe.But energy experts said that building enough terminals on both sides of the Atlantic to significantly expand U.S. exports of liquefied natural gas, or L.N.G., to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Mr. Biden and the European Commission president, Ursula von der Leyen, announced on Friday.“In the near term there are really no good options, other than begging an Asian buyer or two to give up their L.N.G. tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once sufficient gas terminals were built, the United States could become the “arsenal for energy” that helps Europe break its dependence on Russia. Friday’s agreement, which calls on the United States to help the European Union secure an additional 15 billion cubic meters of liquefied natural gas this year, could also undermine efforts by Mr. Biden and European officials to combat climate change. Once new export and import terminals are built, they will probably keep operating for several decades, perpetuating the use of a fossil fuel much longer than many environmentalists consider sustainable for the planet’s well-being.For now, however, climate concerns appear to be taking a back seat as U.S. and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine by depriving him of billions of dollars in energy sales.The United States has already increased energy exports to Europe substantially. So far this year, nearly three-quarters of U.S. L.N.G. has gone to Europe, up from 34 percent for all of 2021. As prices for natural gas have soared in Europe, American companies have done everything they can to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forgo L.N.G. shipments so they could be sent to Europe.The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. Gas bubbles out of the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers there are gradually increasing their output of both oil and gas after greatly reducing production in the first year of the pandemic, when energy prices collapsed.But the big problem with sending Europe more energy is that natural gas, unlike crude oil, cannot easily be put on oceangoing ships. The gas has to first be chilled in an expensive process at export terminals, mostly on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process is run in reverse to convert L.N.G. back into gas.A large export or import terminal can cost more than $1 billion, and planning, obtaining permits and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also gets L.N.G. from suppliers like Qatar and Egypt.Some European countries, including Germany, have until recently been uninterested in building L.N.G. terminals because it was far cheaper to import gas by pipeline from Russia. Germany is now reviving plans to build its first L.N.G. import terminal on its northern coast.A pier in Wilhelmshaven, Germany, the port where Uniper, a German energy company, wanted to build a liquified natural gas terminal before it was shelved. Now Germany is reviving plans to build it.The New York Times“Europe’s need for gas far exceeds what the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”In the longer term, however, energy experts say the United States could do a lot to help Europe. Along with the European Union, Washington could provide loan guarantees for U.S. export and European import terminals to reduce costs and accelerate construction. Governments could require international lending institutions like the World Bank and the European Investment Bank to make natural gas terminals, pipelines and processing facilities a priority. And they could ease regulations that gas producers, pipeline builders and terminal developers argue have made it more difficult or expensive to build gas infrastructure.Charif Souki, executive chairman of Tellurian, a U.S. gas producer that is planning to build an export terminal in Louisiana, said he hoped the Biden administration would streamline permitting and environmental reviews “to make sure things happen quickly without micromanaging everything.” He added that the government could encourage banks and investors, some of whom have recently avoided oil and gas projects in an effort to burnish their climate credentials, to lend to projects like his.“If all the major banks in the U.S. and major institutions like BlackRock and Blackstone feel comfortable investing in hydrocarbons, and they are not going to be criticized, we will develop $100 billion worth of infrastructure we need,” Mr. Souki said.A handful of export terminals are under construction in the United States and could increase exports by roughly a third by 2026. Roughly a dozen U.S. export terminal projects have been approved by the Federal Energy Regulatory Commission but can’t go ahead until they secure financing from investors and lenders.“That’s the bottleneck,” Mr. Tsafos said.Roughly 10 European import terminals are being built or are in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most still don’t have their financing lined up.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 125 Shares99 Views

    in Economy

    U.S. and Allies Will Strip Russia of Favored Trade Status

    by

    WASHINGTON — President Biden and other Western leaders moved on Friday to further isolate Russia from the global trading system, saying they would strip the country of normal trade relations and take other steps to sever its links to the world economy in response to President Vladimir V. Putin’s invasion of Ukraine.The measures, which were announced jointly with the European Union and other Group of 7 countries, would allow countries to impose higher tariffs on Russian goods and would prevent Russia from borrowing funds from multilateral institutions like the International Monetary Fund and the World Bank.Mr. Biden also moved to cut off additional avenues of trade between the United States and Russia, barring lucrative imports like seafood, vodka and certain diamonds, which the White House estimated would cost Russia more than $1 billion in export revenues per year.The United States will also restrict exports to Russia and Belarus of luxury items like high-end watches, vehicles, alcohol, jewelry and apparel. The European Union announced its own set of bans, including barring imports of Russian iron and steel.The restrictions add to a growing list of economic barriers that much of the developed world has put in place on Russia, whose economy is already suffering as a result. The ruble has lost nearly half its value over the past month, food prices are soaring and Russia is in danger of defaulting on its sovereign debt. Its stock market has remained closed since the war began.Mr. Biden said on Friday that the moves “will be another crushing blow to the Russian economy.” He said Russia was “already suffering very badly” from the sanctions, adding that the West’s economic pressure was a reason the Russian stock market had not reopened.“It’ll blow up” once it opens, Mr. Biden predicted.The White House has been under pressure in recent days to respond to Russian attacks in Ukraine, including the shelling of hospitals, other buildings and civilian evacuation routes. The White House has warned that Russia may also use chemical weapons against Ukrainians, but it has repeatedly said that Mr. Biden will not send American troops into the fray.Instead, the administration has focused on ratcheting up economic pressure. Earlier in the week, Mr. Biden banned imports of Russian oil, gas and coal and imposed restrictions on U.S. energy investments in Russia.The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. The Group of 7 countries, which also include Canada, Britain, France, Germany, Italy and Japan, purchased about half of Russia’s exports in 2019.Russia’s preferential trade status is conveyed by its membership in the World Trade Organization, whose rules require that all members grant each other “most favored nation” trading status in which goods can flow between countries at lower tariff rates.Taking away that status — which the United States calls “permanent normal trade relations” — would most likely have a much larger impact for the European Union, which is Russia’s largest trading partner and a major importer of Russian fuel, minerals, wood, steel and fertilizer.In the United States, the move would carry heavy symbolism, but it could have a limited economic impact compared with other sanctions that have already been imposed, according to trade experts.Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, said the measure would raise U.S. tariffs on Russian products to an average of about 32 percent from 3 percent.“However, the trade impact on Russia of such a tariff hike would be small, as the United States is not a particularly sizable export destination for Russian products,” he said. Russia was the 20th-largest supplier of goods to the United States in 2019, sending mainly energy products and minerals.And many of those goods would be subject to far lower tariffs — in some cases none at all — as a result of a decades-old trade law that would kick into place if the preferential trade status were revoked.Each country will follow its own domestic process to make this change, the Biden administration said. The European Union has begun to pave the way for higher tariffs on Russian goods, but the bloc’s 27 member countries must agree on how to carry that out. Canada announced last week that it would withdraw most favored nation tariffs for both Russia and Belarus, a close Russian ally.In the United States, the task falls to Congress, which had been pressuring the administration to consider such a move.House Democrats proposed two weeks ago to strip Russia of its trading status and begin a process to expel the country from the World Trade Organization. This week, top Democratic and Republican lawmakers said they would include the measures in a bill to penalize Russia, but at the White House’s request, Democrats ultimately stripped out the provision to remove Russia’s special trading status. The bill passed the House on Wednesday but has yet to pass the Senate.“It was taken out because the president wants to talk to our allies about that action, which I think is appropriate,” Representative Steny H. Hoyer, Democrat of Maryland and the majority leader, told reporters this week.Speaker Nancy Pelosi said on Friday that the House would take up legislation next week to formalize the revocation of Russia’s trading status.“It is our hope that it will receive a strong, bipartisan vote,” she said.If approved, the measure would add to an array of harsh sanctions already announced by the United States and its allies. Western governments have reduced their energy trade with Russia, frozen the assets of Russian officials and oligarchs, and cut off the country from the dollar-denominated global financial system.An icebreaker cut a path for a cargo ship near the Franz Josef Land archipelago in Russia last year. The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. Emile Ducke for The New York TimesGovernments have also banned exports of advanced technology and transactions with Russia’s central bank. On Friday, the Bank for International Settlements, which provides banking services to the world’s central banks, said it was no longer conducting transactions with Russia. And the Treasury Department placed new economic sanctions on three immediate family members of Mr. Putin’s spokesman, along with 12 members of the Russian Duma and the management board of VTB Bank, which has already been sanctioned.The Treasury Department said it was specifically targeting a plane and a yacht of the Russian billionaire Viktor F. Vekselberg, which together are worth an estimated $180 million. Mr. Vekselberg is an ally of Mr. Putin, the department said.The Russian government has fired back by announcing it would place its own restrictions on its exports, including of raw materials.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 138 Shares189 Views

    in Economy

    CPI Is Expected to Put Inflation at 7.8% for February 2022

    by

    Prices in the year though February were expected to have risen 7.8 percent, which would be the fastest pace of inflation in 40 years as gas prices increased and an array of goods and services became more expensive.Fresh Consumer Price Index data is set for release Thursday morning, and that estimate — the median in a Bloomberg survey of economists — underscores the grim reality facing economic policymakers. Climbing prices are hitting consumers in the pocketbook, causing their confidence to fall and stretching household budgets. The burden is falling most intensely on lower-income households, which devote a big chunk of their budgets to daily necessities that are rapidly becoming costlier.The quickest inflation in most Americans’ lifetimes is hurting President Biden politically, and the challenge could grow temporarily worse amid fallout from sanctions and other economic responses to Russia’s war in Ukraine, which has already pushed gas prices higher. Rising prices tend to make voters unhappy, posing trouble for Democrats ahead of the midterm elections in November.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.They are also a problem for the Federal Reserve, which is in charge of achieving price stability. The central bank has signaled it will raise interest rates by a quarter percentage point at its meeting next week, likely the first in a series of moves meant to increase the cost of borrowing and spending money and slow down the economy. By reducing consumption and slowing the labor market, the Fed is able to take some pressure off inflation over time.“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Jerome H. Powell, the Fed chair, told Congress last week. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”Even as the Fed prepares to rein in demand, high gas costs tied to the conflict in Ukraine threaten to keep inflation elevated for longer. They could become a serious issue for central bank policymakers if they help convince consumers that the burst in prices will last. If people begin to expect inflation, they may change their behavior in ways that make it more permanent — accepting price increases more readily and asking for bigger raises to keep up.This is just the latest instance, as far as prices go, in which what can go wrong does seem to be going wrong.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 113 Shares149 Views

    in Economy

    Economic Ties Among Nations Spur Peace. Or Do They?

    by

    The Russian invasion of Ukraine strains the long-held idea that shared interests around business and commerce can deflect military conflict.Russia’s war in Ukraine is not only reshaping the strategic and political order in Europe, it is also upending long-held assumptions about the intricate connections that are a signature of the global economy.Millions of times a day, far-flung exchanges of money and goods crisscross land borders and oceans, creating enormous wealth, however unequally distributed. But those connections have also exposed economies to financial upheaval and crippling shortages when the flows are interrupted.The snarled supply lines and shortfalls caused by the pandemic created a wide awareness of these vulnerabilities. Now, the invasion has delivered a bracing new spur to governments in Europe and elsewhere to reassess how to balance the desire for efficiency and growth with the need for self-sufficiency and national security.And it is calling into question a tenet of liberal capitalism — that shared economic interests help prevent military conflicts.It is an idea that stretches back over the centuries and has been endorsed by romantic idealists and steely realists. The philosophers John Stuart Mill and Immanuel Kant wrote about it in treatises. The British politicians Richard Cobden and John Bright invoked it in the 19th century to repeal the protectionist Corn Laws, the tariffs and restrictions imposed on imported grains that shielded landowners from competition and stifled free trade.Later, Norman Angell was awarded the Nobel Peace Prize for writing that world leaders were under “A Great Illusion” that armed conflict and conquest would bring greater wealth. During the Cold War, it was an element of the rationale for détente with the Soviet Union — to, as Henry Kissinger said, “create links that will provide incentive for moderation.”German Chancellor Olaf Scholz in Moscow last month. Since the fall of the Soviet Union, policies by Germany and other European countries have been partly shaped by the idea that economic ties with Russia could deflect conflict.Pool photo by Maxim ShemetovSince the disintegration of the Soviet Union three decades ago, the idea that economic ties can help prevent conflict has partly guided the policies toward Russia by Germany, Italy and several other European nations.Today, Russia is the world’s largest exporter of oil and wheat. The European Union was its biggest trading partner, receiving 40 percent of its natural gas, 25 percent of its oil and a hefty portion of its coal from Russia. Russia also supplies other countries with raw materials like palladium, titanium, neon and aluminum that are used in everything from semiconductors to car manufacturing.Just last summer, Russian, British, French and German gas companies completed a decade-long, $11 billion project to build a direct pipeline, Nord Stream 2, that was awaiting approval from a German regulator. But Germany halted certification of the pipeline after Russia recognized two separatist regions in Ukraine.From the start, part of Germany’s argument for the pipeline — the second to connect Russia and Germany — was that it would more closely align Russia’s interests with Europe’s. Germany also built its climate policy around Russian oil and gas, assuming it would provide energy as Germany developed more renewable sources and closed its nuclear power plants.Benefits ran both ways. Globalization rescued Russia from a financial meltdown and staggering inflation in 1998 — and ultimately smoothed the way for the rise to power of Vladimir V. Putin, Russia’s president. Money earned from energy exports accounted for a quarter of Russia’s gross domestic product last year.The Nord Stream 2 plant in Germany. The pipeline had been seen as a way to align Russia’s interests with those of Germany. Now it has been shelved.Michael Sohn/Associated PressCritics of Nord Stream 2, particularly in the United States and Eastern Europe, warned that increasing reliance on Russian energy would give it too much leverage, a point that President Ronald Reagan made 40 years earlier to block a previous pipeline. Europeans were still under an illusion, the argument went, only this time it was that economic ties would prevent baldfaced aggression.Still, more recently, those economic ties contributed to skepticism that Russia would launch an all-out attack on Ukraine in defiance of its major trading partners.In the weeks leading up to the invasion, many European leaders demurred from joining what they viewed as the United States’ overhyped warnings. One by one, French President Emmanuel Macron, German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi talked or met with Mr. Putin, hopeful that a diplomatic settlement would prevail.There are good reasons for the European Union to believe that economic ties would bind potential combatants more closely together, said Richard Haass, president of the Council on Foreign Relations. The proof was the European Union itself. The organization’s roots go back to the creation after World War II of the European Coal and Steel Community, a pact among six nations meant to avert conflict by pooling control of these two essential commodities.“The idea was that if you knit together the French and German economies, they wouldn’t be able to go to war,” Mr. Haass said. The aim was to prevent World War III.Scholars have attempted to prove that the theory worked in the real world — studying tens of thousands of trade relations and military conflicts over several decades — and have come to different conclusions.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 113 Shares149 Views

    in Economy

    Russian Oil Finds Few Buyers Even at Deep Discounts

    by

    Some European buyers, shippers, banks and insurers have grown leery of doing business with the country in recent days.HOUSTON — The United States and the European Union have been unwilling to put sanctions on Russian energy exports in response to the country’s invasion of Ukraine. But some oil traders appear to have concluded that buying oil from Russia is just not worth the trouble.One of the three top oil producers in the world, after the United States and Saudi Arabia, Russia provides roughly 10 percent of the global supply. But in recent days traders and European refineries have greatly reduced their purchases of Russian oil. Some have stopped altogether.Buyers are pulling back because they or the shipping companies, banks and insurance companies they use are worried about running afoul of Western sanctions in place now or those that might come later, energy experts said. Others are worried that shipments could be hit by missiles, and some just don’t want to risk being seen as bankrolling the government of President Vladimir V. Putin.Russian exporters have been offering the country’s highest-quality oil at a discount of up to $20 a barrel in recent days but have found few buyers, analysts said. Buyers, in Europe in particular, have been switching to Middle Eastern oil, a decision that has helped drive the global oil price above $100 a barrel for the first time since 2014.“The enablers of oil exports — the banks, insurance companies, tanker companies and even multinational oil companies — have enacted what amounts to a de facto ban,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. Mr. Kloza said it could take weeks before it was clear how significantly Russia’s oil exports had fallen and whether the drop would be sustained, but “clearly the Russian contribution to world oil supply has been constricted.”On Tuesday, the International Energy Agency said its members, which include the United States and more than a dozen European nations, had agreed to release 60 million barrels of oil from their strategic reserves. The announcement had little impact on global oil prices, probably because the amount was modest, amounting to roughly three days of consumption by the United States. The White House and Energy Department signaled that more oil could be released later by describing the I.E.A. agreement as an “initial release.”Much of Russia’s oil is shipped out of Black Sea ports for use in Europe. Some shipping companies carrying oil and commercial goods are afraid that their vessels will be fired on. Congestion in sea lanes is interrupting the shipping of not only oil but also food. On Friday, an unidentified missile hit a Moldovan-flagged tanker carrying oil and diesel.“Russia’s flagship Urals blend was one of the first to break through the $100-per-barrel mark this year,” said Louise Dickson, senior oil market analyst at Rystad Energy, a research and consulting firm. “But the country’s incursion into Ukraine has now made it one of the most toxic barrels on the market.”As European refiners buy more oil from places like Saudi Arabia, Russian companies are increasingly trying to sell their crude to refineries in China and other Asian countries by offering them discounts.Most of Russia’s roughly five million barrels of daily oil exports go to Europe. About 700,000 barrels a day are consumed in the United States, roughly 4 percent of the U.S. market.Several Scandinavian refiners, including Neste Oyj of Finland and Preem of Sweden, have said they halted purchases of Russian oil.“Due to the current situation and uncertainty in the market, Neste has mostly replaced Russian crude oil with other crudes, such as North Sea oil,” said Theodore Rolfvondenbaumen, a Neste spokesman. As the company watches future sanctions and “potential countersanctions,” he said, it is preparing “for various options in procurement, production and logistics.”Energy experts say the international oil trade could be rejiggered in ways that are similar to what happened in 1956 when Britain, France and Israel attacked Egypt and closed the Suez Canal. For a time, oil tankers were rerouted around Africa. Similarly, over the next few months Russian oil once shipped to Europe could go to China.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 113 Shares119 Views

    in Economy

    How Sanctions on Russia Are Affecting the Global Economy

    by

    The price of energy has already shot higher, and the conflict imperils supply chains, factors that could exacerbate inflation and suppress growth.In the span of just a few days, the global economic outlook has darkened while troops battled in Ukraine and unexpectedly potent financial sanctions rocked Russia’s economy and threatened to further fuel worldwide inflation.The price of oil, natural gas and other staples spiked on Monday. At the same time, the groaning weight on supply chains, still laboring from the pandemic, rose as the United States, Europe and their allies tightened the screws on Russia’s financial transactions and froze hundreds of billions of dollars of the central bank’s assets that are held abroad.Russia has long been a relatively minor player in the global economy, accounting for just 1.7 percent of the world’s total output despite its enormous energy exports. President Vladimir V. Putin has moved to further insulate it in recent years, building up a storehouse of foreign exchange reserves, reducing national debt and even banning cheese and other food imports from Europe.But while Mr. Putin has ignored a slate of international norms, he cannot ignore a modern and mammoth financial system that is largely controlled by governments and bankers outside his country. He has mobilized tens of thousands of his troops, and, in response, allied governments have mobilized their vast financial power.Now, “it’s a gamble between a financial clock and a military clock, to vaporize the resources to conduct a war,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council.Together, the invasion and the sanctions inject a huge dose of uncertainty and volatility into economic decision-making, heightening the risk to the global outlook.A corn warehouse near Stavropol, Russia. Russia and Ukraine are large exporters of corn.Eduard Korniyenko/ReutersThe sanctions were designed to avoid disrupting essential energy exports, which Europe, in particular, relies on to heat homes, power factories and fill gas tanks. That helped dampen, but did not erase, a surge in energy prices caused by war and anxieties about disruptions in the flow of oil and gas.Worries about shortages also pushed up the price of some grains and metals, which would inflict higher costs on consumers and businesses. Russia and Ukraine are also large exporters of wheat and corn, as well as essential metals, like palladium, aluminum and nickel, that are used in everything from mobile phones to automobiles.Already eye-popping transport costs are also expected to soar.“We are going to see rates skyrocket for ocean and air,” said Glenn Koepke, general manager of network collaboration at FourKites, a supply chain consultancy in Chicago. He warned that ocean rates could double or triple to $30,000 a container from $10,000 a container, and that airfreight costs were expected to jump even higher.Russia closed its airspace to 36 countries, which means shipping planes will have to divert to roundabout routes, leading them to spend more on fuel and possibly encouraging them to reduce the size of their loads.Loading rolls of steel onto a ship at the port of Mykolaiv in Ukraine. One expert predicted that ocean transport costs could triple.Brendan Hoffman for The New York Times“We’re also going to see more product shortages,” Mr. Koepke said. While it’s a slower season now, he said, “companies are ramping up for summer volume, and that’s going to have a major impact on our supply chain.”In a flurry of updates on Monday, several Wall Street analysts and economists acknowledged that they had underestimated the extent of Russia’s invasion of Ukraine and the international response. With events rapidly piling up, assessments of the potential economic fallout ranged from the mild to the severe.Inflation was already a concern, running in the United States at the highest it has been since the 1980s. Now questions about how much more inflation might rise — and how the Federal Reserve and other central banks respond — hovered over every scenario.“The Fed is in a box, inflation is running at 7.5 percent, but they know if they raise interest rates, that will tank markets,” said Desmond Lachman, a senior fellow at the American Enterprise Institute. “The policy choices aren’t good, so I don’t see how this has a happy outcome.”Others were more cautious about the spillover effects given the isolation of Russia’s economy.Adam Posen, president of the Peterson Institute for International Economics, said there were vexing questions, particularly in Europe, about what the conflict would mean for inflation — and whether it posed the prospect of stagflation, in which economic growth slows and prices rise quickly.But overall, he said, “the damage is likely to be small.”That doesn’t mean there won’t be intense pain in spots. Mr. Posen noted that a handful of banks in Europe could suffer from their exposures to the Russian financial system, and that Eastern European companies might lose access to money in the country.Thousands of people fleeing Ukraine are also streaming into neighboring countries like Poland, Moldova and Romania, which could add to their costs.Thousands of Ukrainian refugees, including this family at the Polish border in Medyka, have fled Ukraine for Poland, Romania and Moldova.Maciek Nabrdalik for The New York TimesTurkey’s economy, which is already struggling, is likely to take a hit. Oxford Economics lowered its forecast for Turkey’s annual growth by 0.4 percentage points to 2.1 percent because of rises in energy prices, disruptions to financial markets and declines in tourism.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 113 Shares149 Views

    in Economy

    Before Ukraine Invasion, Russia and China Cemented Economic Ties

    by

    Facing a wary United States and worried about depending on imports by sea, China is buying more energy and food from its northern neighbor.BEIJING — As Russia wreaks havoc in Ukraine, Moscow has a powerful economic ally to help it resist Western sanctions: China.Chinese purchases of oil from Russia in December surpassed its purchases from Saudi Arabia. Six days before the military campaign began, Russia announced a yearslong deal to sell 100 million tons of coal to China — a contract worth more than $20 billion. And hours before Russia began bombing Ukraine, China agreed to buy Russian wheat despite concerns about plant diseases.In a throwback to the 1950s, when Mao Zedong worked closely with Joseph Stalin and then Nikita Khrushchev, China is again drawing close to Russia. As the United States and the European Union have become wary of China, Beijing’s leaders have decided that their best geopolitical prospects lie in marrying their vast industrial might with Russia’s formidable natural resources.Recent food and energy deals are just the latest signals of China’s economic alignment with Russia.“What happened up to now is only a beginning for both the Russian expansionism by force and the Chinese economic and financial support to Russia,” Shi Yinhong, a professor of international relations at Renmin University in Beijing, said in a text message. “This does not mean that China directly supports in any degree that expansionism — this only means that Beijing strongly feels the necessity to maintain and boost strategic partnership with Moscow.”The United States and the European Union are hoping that sanctions force Russia to reconsider its policies. But Wang Wenbin, the Chinese foreign ministry’s spokesman, said at a briefing on Friday that China opposed the use of sanctions.“Sanctions are never an effective way to solve the problems,” he said. “I hope relevant parties will still try to solve the problem through dialogue and consultation.”At the same time, Russia’s invasion of Ukraine has imposed an awkward diplomatic quandary on China by violating the principle of national sovereignty that the Chinese leaders regard as sacrosanct. While President Xi Jinping of China has not criticized Russia publicly, he could use his country’s economic relationship with its northern neighbor as leverage to persuade the Russians to resolve the crisis quickly.Mr. Xi and President Vladimir V. Putin of Russia spoke by phone on Friday. An official Chinese statement said afterward that Mr. Xi had expressed support for Russia in negotiating an agreement with Ukraine — a stance that Mr. Putin has also favored, provided that Ukraine accepts his terms.Until now, much of China’s energy and food imports came across seas patrolled by the U.S. or Indian navies. As China’s leaders have focused lately on the possibility of conflict, with military spending last year growing four times as fast as other government spending, they have emphasized greater reliance on Russia for crucial supplies.China and Russia share a nearly 2,700-mile border, and in recent years China has become Russia’s largest source of imports and the biggest destination for its exports.“Given the geopolitical tensions, Russia is a very natural geopolitical partner,” said Andy Mok, a senior research fellow at the Center for China and Globalization in Beijing.Initial Western sanctions on Russia have focused on limiting technology exports and imposing financial penalties. For now, U.S. officials have avoided targeting consumer goods, agricultural products and energy, to try to avoid harming ordinary people and further fueling inflation.China is the world’s dominant manufacturer of electronics, machinery and other manufactured goods, and has been supplying them to Russia in exchange for food and energy.A train carrying coal in Yekaterinburg, Russia, in 2020. China’s imports of Russian coal have more than doubled in the past three years.Maxim Babenko for The New York TimesThe new cornerstone of relations between China and Russia is the Sino-Russian nonaggression pact concluded in Beijing on Feb. 4. Mr. Xi and Mr. Putin reached the deal hours before the opening ceremony of the Beijing Winter Olympics and issued a statement saying the countries’ friendship “has no bounds.”The pact freed Mr. Putin to move troops and military equipment from Russia’s border with China to its border with Ukraine while ushering in closer economic cooperation.“The joint statement is strong and has lasting consequences for the new world order,” said Jean-Pierre Cabestan, a research professor of political science at Hong Kong Baptist University.The Chinese and Russian governments share many values, particularly their antipathy to sanctions the West imposes on human-rights grounds. “The two sides firmly believe that defending democracy and human rights should not be used as a tool to exert pressure on other countries,” their pact on Feb. 4 said.When the Obama administration imposed sanctions on Russia after its invasion of Ukraine’s Crimea region in 2014, China helped Russia evade them.It is not clear if China will help Russia evade sanctions put in place this week. On Tuesday, the Biden administration added to previous measures by announcing sanctions against Russia’s two largest financial institutions and sweeping restrictions on advanced technologies that can be exported to Russia. The technological curbs, when taken in concert with allies, would block roughly a fifth of Russian imports, the administration said.Chinese companies that circumvent those rules could face escalating punishment by the United States, including criminal and civil penalties, said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Those businesses could also be cut off from American technology and the financial system.ZTE and Huawei, two Chinese firms that were barred from receiving American technological exports, attracted the attention of the U.S. government in part for evading sanctions on Iran.“The interesting question is: Is China going to comply with this?” Mr. Chorzempa said. China also has a law designed to penalize companies for following extraterritorial sanctions by countries like the United States, he said, all factors that “could put companies in a real bind.”“If they don’t comply with the U.S., they’re in trouble with the U.S., but if they don’t comply with China, they could also face penalties in China,” he said.Of course, collecting fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules could be difficult, Mr. Chorzempa added. “It’s already proving difficult to monitor the things that are already controlled, and if you expand that list, that’s going to be a real challenge to verify what’s going to Russia,” he said.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More